Talks of Greece's exit from the eurozone have gained momentum, although last weekend brought some good news on that front. Reports suggest that the pro-bailout New Democracy party was leading in the opinion polls in Greece. Though Greece may not create much ripples in the market in the near term ahead of the June 17th elections, the situation in Spain warrants close attention. That apart, the general economic outlook for the eurozone is bleak, going by recent private sector activity indicators.
The U.S. is in a relatively better position. Economic data have been at least lukewarm if not buoyant. Last week confirmed the bottoming of the housing market, which has thus far been a sore spot. BMO Capital Markets expects a further pick up in the U.S. economic growth in the second half of the year, although the quickening in the pace of growth relies on Europe containing its euro crisis and U.S. businesses setting aside concerns about a possible end of the year fiscal cliff. The domestic economy could fall back into recession in 2013 if the planned tax increases and spending cuts for the next year are not reduced
A report released by the National Association of Realtors' last week showed that existing home sales rose 3.4 percent month-over-month to a seasonally adjusted annual rate of 4.62 million units in April compared to expectations of 4.66 million units.
Inventories of existing homes rose 10 percent month-over-month, while inventories measured in terms of months of supply also rose to 6.6 months from 6.2 months. Nevertheless, the median house price rose 10 percent from last year.
Also, the Commerce Department reported that new home sales rose 3.3 percent month-over-month to a seasonally adjusted annual rate of 343,000 units in April, while March's reading was upwardly revised to 332,000 units. Inventories rose 1.4 percent, while the months of supply fell to 5.1 months. Meanwhile, the median price of a new home rose 5 percent year-over-year and was 0.7 percent higher than in the previous month.
The durable goods orders rose by a smaller than expected 0.2 percent month-over-month in April, according to a report released by the Commerce Department. Excluding transportation, orders were down 0.6 percent. Orders for general machinery, computers/electronics, computer-related, communications, electrical appliances all declined during the month. Non-defense capital goods orders, excluding aircraft, fell 1.9 percent.
The unfolding truncated week has many market moving reports in its economic calendar, with the monthly jobs report for May from both the Labor Department and the ADP and the results of the Institute for Supply Management's manufacturing survey being the key reports among them. Traders may also closely watch the Conference Board's consumer confidence index for May, the National Association of Realtors' pending home sales index for April, the weekly jobless claims report, the ISM-Chicago's manufacturing index for May, the personal income and spending report for April and auto sales for May.
The S&P Case-Shiller house price index for March, the second estimate of first quarter GDP, the Commerce Department's construction spending report for April and some Fed speeches round up the economic calendar of the week.
The government non-farm payroll report is expected to show a pick up in the pace of job gains in May. Nevertheless, the gain may trail the average payroll gain of 229,000 recorded for the first quarter, as employers remain cautious due to the European debt crisis and the fiscal cliff faced by the U.S. economy. BMO Capital Markets highlights the fact the labor force participation declined to a 3-decade low in April, which does not speak well of the health of the labor market.
The Institute for Supply Management's manufacturing survey is expected to show a modest slowdown in the expansion of the manufacturing activity. Nevertheless, the sector's momentum is likely to be sustained, given the fairly robust export growth, a healthy auto market and modest strength seen in consumer spending.
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the U.S., is scheduled to be released at 9 am. Economists expect a seasonally adjusted 0.3 percent month-over-month increase in the 20-city composite house price index for March.
In February, the S&P Case-Shiller 20-city composite house price index rose a seasonally adjusted 0.15 percent month-over-month in February, while on a year-over-year basis, prices fell 3.49 percent.
The Conference Board is scheduled to release its consumer confidence report for May at 10 am ET. The report, which is based on a survey of 5,000 U.S. households, is expected to show that the consumer confidence index edged up to 69.7 in May.
The U.S. consumer confidence index fell to 69.2 in April from a revised reading of 69.5 for March. The present situation index rose 1.5 points to 51.4, the highest level since September 2008, while the expectations index declined 1.4 points to 81.1.
New York Federal Reserve Bank President William Dudley will do a press briefing on job polarization and rising inequality in the region at 1 pm ET.
Dallas Federal Reserve Bank President Richard Fisher is due to speak to a community forum sponsored by the Bank, on "Federal Reserve Operations and Economic Update," in San Antonio at 1:20 pm ET.
Boston Federal Reserve President Eric Rosengren will speak at the 27th Annual Meeting of the Worcester Regional Research Center at 4:30 pm ET.
Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is expected to have risen 0.5 percent in April.
The pending home sales index rose by 4.1 percent month-over-month in March. The previous month's reading was upwardly revised to show a 0.4 percent increase versus the 0.5 percent drop initially estimated. Pending home sales rose in the Northeast and the Midwest, while in the South and the West, sales declined.
The ADP National Employment report, which sheds light on non-farm private employment, is scheduled to be released at 8:15 am ET. The report is usually released two days prior to the Labor Department's employment report. The consensus expectations are for an addition of 154,000 jobs by the sector in May following an addition of 119,000 jobs in April.
The Bureau of Economic Analysis is due to release its preliminary estimate of first quarter GDP at 8:30 am ET. Economists expect GDP growth to be downwardly revised to 1.9 percent for the quarter.
Advance estimates released last month revealed that the U.S. economy expanded at a lesser pace than had been expected. The GDP growth slowed to 2.2 percent from the 3 percent rate seen in the fourth quarter. Inventories contributed 0.6 percentage points to growth and on a net basis, exports did not contribute to growth. This meant that domestic demand grew at an anemic pace.
The Labor Department is due to release its customary jobless claims report for the week ended May 26th at 8:30 am ET. Economists expect claims to remain unchanged at 370,000 in the recent reporting week.
New unemployment claims for the week ending May 19 came in at a seasonally adjusted level of 370,000, a slight decline from the previous week's revised level of 372,000.The previous week had initially showed new unemployment claims holding level at 370,000 from the week before, so the revisions mark a slight increase.
Nevertheless the report for May 19 still comes in below the expectations of most economists, who predicted a slight increase to 371,000. The four-week rolling average of new unemployment claims, a figure that eases some of the week-to-week volatility in the reports, also showed a slight decrease, dropping 5,500 to 370,000 from the previous week's revised average of 375,500.
Federal Reserve Bank President Sandra Pianalto is scheduled to speak to the National Association for Business Economics, in Cleveland, on monetary policy and the economic outlook at 8:30 am ET.
The results of the Institute of Supply Management-Chicago's business survey for May are scheduled to be released at 9:45 am ET. Economists expect the business barometer index based on the survey to edge down to 56.1.
The index fell 6 points to 56.2 in April, marking the lowest reading since November 2009. The new orders index declined roughly 6 points to 57.4 and the production index fell 11.5 points to 57.1, while the order backlogs index rose 2.5 points. The employment index also improved, rising 2.4 points to 58.7.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 25th at 10:30 am ET.
Crude oil inventories rose by 0.9 million barrels to 382.5 million barrels in the week ended May 18th. Inventories remained above the upper limit of the average range.
On the other hand, gasoline inventories declined by 3.3 million barrels and were in the lower limit of the average range. Distillate stockpiles also fell, edging down by 0.3 million barrels and remained in the lower limit of the average range. Refinery capacity utilization averaged 87.2 percent over the four weeks ended May 18th compared to 86.3 percent over the previous four weeks.
Individual automakers are scheduled to release their monthly U.S. sales results for April. The data will reveal the unit sales of domestically produced cars and light duty trucks, including sports utility vehicles and mini-vans, during the month. Economists expect domestic vehicle sales of 14.5 million for May, up 14.4 million last month.
The Bureau of Economic Analysis is due to release its personal income & outlays report for April. Economists expect the report, which is due out at 8:30 am ET, to show that personal income as well as personal spending rose 0.3 percent in April.
Personal income rose 0.4 percent month-over-month in March compared to expectations for 0.3 percent growth. At the same time, personal spending increased by a smaller than expected 0.3 percent. The savings rate ticked up 0.1 percentage points to 3.8 percent. The core personal consumption expenditure price index rose 2 percent on a year-over-year basis.
The Labor Department is scheduled to release its monthly non-farm payroll report at 8:30 am ET. Economists expect non-farm payrolls for May to increase by 150,000 and the unemployment rate to remain unchanged at 8.1 percent.
The U.S. economy added 115,000 jobs in April, while economists had expected non-farm payrolls to increase by 165,000. Meanwhile, the previous month's job gains were upwardly revised to 154,000 from the 120,000 reported earlier. The February job additions were also revised to 259,000 from 240,000.
The unemployment rate based on the household survey ticked down 0.1 points to 8.1 percent. The labor force participation rate declined to 63.6 percent, while the employment population rate was little changed at 58.4 percent. The average hourly earnings for all employees rose by 1 cent to $23.38, while on a year-over-year basis, average hourly earnings rose by 1.8 percent.
The results of the manufacturing survey of the Institute for Supply Management, which are based on data compiled from purchasing and supply executives nationwide, are due out at 10 am ET. Economists expect the index to show a reading of 54 for May.
In April, the manufacturing purchasing managers' index rose 1.4 points to 54.8. The new orders index rose by 3.7 points to 54.8 and the production index climbed by 2.7 points to 61. The employment index also improved, rising by 1.2 points to 57.3. Meanwhile, the order backlogs index fell 3 points to 49.5.
The Commerce Department's construction spending report to be released at 10 am ET is expected to show a 0.4percent increase in April.
U.S. construction spending edged up 0.1 percent month-over-month in March. Private construction spending climbed 0.7 percent, offsetting a 1.1 percent decline in public construction spending. Among private construction, residential construction spending by 0.7 percent.
by RTT Staff Writer
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